Vancouver displaced Sydney as the least-affordable housing market after Hong Kong among large English-speaking cities, as home prices rose faster than incomes, a study of 325 metropolitan areas worldwide showed.

Vancouver’s median home price of $678,000 in the third quarter was 10.6 times its median pretax household income of $63,800, making the city “severely unaffordable,” Demographia said in a report today. A ratio of 3 or less is considered “affordable,” according to the public-policy firm’s survey of markets in Australia, New Zealand, Ireland, the U.K., the U.S., Canada and Hong Kong.

Sydney’s ratio of median home price to income was 9.2, while Hong Kong’s was 12.6, a record for the eight-year-old survey, surpassing the previous high of 11.5 for Los Angeles in 2007. Home prices in Hong Kong, Vancouver and Sydney haven’t plunged as they have elsewhere, such as in Ireland, now the second most-affordable country, after the U.S., the study said.

“Housing affordability generally improved in the surveyed nations, though the most unaffordable markets, Hong Kong and Vancouver, became even more unaffordable,” wrote Wendell Cox, principal of Belleville, Illinois-based Demographia, and Hugh Pavletich, managing director of Pavletich Properties Ltd., a commercial developer and investment company in Christchurch, New Zealand.

Policies limiting lots available for construction drove up land prices, putting homes out of reach for middle-class buyers and younger workers in cities such as Vancouver and Sydney, the researchers said. The median price of a detached house in metropolitan Vancouver reached a record $900,000 in April 2011, according to the Real Estate Board of Greater Vancouver.

‘Massively Deteriorating’

“The causes of massively deteriorating housing affordability are not a mystery,” Cox and Pavletich said. “They inevitably result from more restrictive land-use regulations adopted by governments with insufficient attention to economic fundamentals.”

The study focuses on the home-affordability ratio, not absolute prices. It doesn’t take into account such influences as falling interest rates, an influx of foreign buyers or the attractions of climate and coastal location.

“There’s no question if you want to live in Manhattan or in a nice, close-in suburb, it’s going to cost you more,” Cox said in a telephone interview. “Demand doesn’t drive up prices. Demand drives up prices if there are constraints in supply, and the cause here is regulation.”

Bubble Bursting

Home prices in the eight capitals of Australia’s states and territories fell 3.7 per cent in 2011 through November and were on pace for the biggest annual decline in at least 12 years on concerns that Europe’s debt crisis may damp the nation’s economic growth, according to figures released Dec. 30 by RP Data, a real estate researcher.

“The bubble is bursting in Australia,” said Pavletich, who operates PerformanceUrbanPlanning.org, a website on urban public-policy issues.

In New Zealand, Christchurch is “severely unaffordable,” with a ratio of 6.3, according to the study. The city is rebuilding after a series of earthquakes that started in 2010.

“There’s huge pressure on the government to open up land supply and get affordable new lots,” said Pavletich, who is an advocate for the effort.

From the end of World War II through the late 1980s, homes in the countries surveyed generally cost two to three times median income, according to Demographia. Today, only the U.S. is affordable by the study’s measure, with Ireland and Canada “moderately unaffordable,” at 3.3 and 3.5 times median income, respectively.

U.S. Cities

San Jose, California, and San Francisco were the least affordable among U.S. housing markets with populations of at least 1 million, according to the survey. Detroit was the most affordable market in that group, with a median multiple of 1.4 times income, according to the study. Atlanta followed with 1.9, and Phoenix with 2.2.

Honolulu, with a smaller population, was the least affordable U.S. city, with a median multiple of 8.7.

Outside the U.S., Dublin, with a median multiple of 3.4, and Edmonton, Alberta, at 3.5, were the most affordable cities.

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